U.K. loses battle in Brussels but gains strength anyway

Opinion: Fight over Junker is prelude to fight over keeping U.K. in the EU

Consciously or unconsciously, David Cameron, the British prime minister, echoed France’s Second World War leader Charles de Gaulle when he stated last week, with regard to the spat over leadership of the European Commission, “Sometimes you have to be ready to lose a battle in order to win a war.”

In posters plastered on the walls of London, Gen. de Gaulle proclaimed in July 1940 that France had lost a battle but not the war. He was referring to the fall of France to Nazi Germany. A great deal of rhetoric has been served up in recent days over a much more minor matter: the nomination of Jean-Claude Juncker, the former Luxembourg prime minister, as the head of the European body that proposes and supervises European legislation.

David Cameron

British Prime Minister David Cameron

The row over Britain’s opposition to Juncker — selected as the next commission head by 26 European Union governmental votes to two on Friday (only Hungary sided with Cameron) — is likely to recede into obscurity in coming years as attention swings back to much more important political and economic questions.

Benefiting from a flexible exchange rate
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and much more freedom to set its own economic rules than countries within economic and monetary union (EMU), Britain is doing much better economically than most of its continental counterparts. This, rather than a struggle in Brussels over a post which has become far more ceremonial as a result of EU power shifts, will be the main factor determining whether or not the U.K. remains an EU member if a referendum on the issue is held in 2017, as Cameron wishes.

Juncker is not an inspiring choice to run the European Commission.

Bloomberg

Jean-Claude Juncker

As a former long-time Luxembourg finance minister as well as prime minister, Juncker was the first permanent head of the Eurogroup of European finance ministers (from 2005). He was one of the senior European policy makers to blame for the complacency over progressively unrealistic economic policies that befell EMU members in the heady days before the euro
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crisis hit home in 2010.

Juncker probably will be reasonably competent, but no more than that. More importantly, he is almost certain to be frustrated. The commission is no longer the pivot of the European system, as it was during the time of Jacques Delors, the former French finance minister who headed the body between 1985 and 1995, one of the few decisive figures out of the 12 who have done the job since 1958.

One of the many negative aspects surrounding Juncker is that he will become the third ex-Luxembourg prime minister (after Gaston Thorn and Jacques Santer) to carry out the job in the past three decades. None left strong traces.

In his new post Juncker will be buffeted by bickering between the real repositories of power, the larger governments among the 28 member states, and the European Parliament that is jealous of the EU’s pronounced swing to inter-governmental procedures, and has gained considerably more leverage after recent years’ legislative changes.

Almost certainly, Juncker would have preferred to have taken on the more influential position of president of the European council of governments as successor to Hermann van Rompuy. That job will now go to someone else.

Once the dust settles on the Juncker maneuvering, the former Luxembourg leader may turn out be the fall guy, saddled with a job he did not want, that he fails to discharge memorably and where he is progressively squeezed by ignoble bargaining among France, Germany and Italy.

The real battleground in Europe now shifts to the efforts by EMU member states suffering deflationary threats to water down the more stringent rules on deficit and debt reduction decided after the euro crisis. One reason why Germany will now step up damage limitation about Cameron’s commission setback is because Berlin needs support from London against Rome and Paris in its fight to maintain economic orthodoxy.

This was a strong reason for Wolfgang Schäuble, the German finance minister, to announce in an interview with the Financial Times on Monday that a British exit from the EU is “unimaginable” and “absolutely not acceptable”.

Schäuble’s comments came amid attempts at reconciliation between Cameron and Juncker in a telephone call on Sunday. The U.K. prime minister congratulated the commission’s president-elect and the latter said he would help solve the U.K.’s concerns over Europe’s future.

Increasingly though, the gloves are coming off in the struggle over economic policies.

In an unusually strong statement on the French economy last week by Jens Weidmann in the Süddeutsche Zeitung, the Bundesbank president assailed France’s inability to stick to the new rules, saying its deficit-to-GDP ratio had exceeded 3% in nine out of the 15 years since monetary union was established while public debt had risen every year since 2001 with one exception.

Pointing to the euro area’s earlier record where overconfidence had proven misplaced, Weidmann said EMU faced “massive shocks” if doubts gained ground over the sustainability of public finances — a strong warning that the last two years of relative euro optimism may turn out to have been something of a golden era.

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